Why Are You Worth Your Salary?

There are plenty of posts on here about whether or not IB or other finance jobs are "worth it." However, I haven't seen many posts on whether or not people on here think that they're worth all of the benefits that come from top finance jobs (high salary, great exit opps, etc.). What makes you think that you're worth it?

In operations, higher pay for professionals is easy to justify. In other words, you move x times the amount of product with just a few hours worth of work, versus longer hours, less productivity for lesser-skilled workers.

No one really knows why finance gets paid so much, because finance produces nothing. The only indication that bankers can be paid a lot is that finance is the bedrock of capitalism. Any organization in this society relies on the services financiers provide.

Therefore, they're usually rewarded handsomely for their close guidance and kinship in executing on whatever strategy comes into play. Also, the financial sector is closer to capitalism, which gives it first proximity to our reward system. Finance pay is a direct result of the market's oversight of our social construct.

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee

No one really knows why finance gets paid so much, because finance produces nothing. The only indication that bankers can be paid a lot is that finance is the bedrock of capitalism. Any organization in this society relies on the services financiers provide.

Finance is the bedrock of any advanced civilization. The period before finance was called the dark ages and the introduction of finance was known as the renaissance. Finance is what turns ideas into reality. The engineer, the architect, the doctor, the whatever the fuck has an idea, but he/she doesn't know if it's a good idea.

That's where finance comes in. It is the mechanism by which scarce capital, of which there are an unlimited number of potential uses, are allocated to their most warranted economic activities. By process of trial and error, the bad ideas are weeded out (do not produce at least required rate of return) and good ideas persist.

It's amazing to me that you're certified in banking and don't know this. A product of our nationalized education system, I guess...

No one really knows why finance gets paid so much, because finance produces nothing. The only indication that bankers can be paid a lot is that finance is the bedrock of capitalism. Any organization in this society relies on the services financiers provide.

Finance is the bedrock of any advanced civilization.

This is an opinion, generally speaking. The earliest civilizations had ledgers, accounting systems, IOUs, etc. The first banks, I believe popped up before the Renaissance, although I could be mistaken--I don't really remember this anymore.

Most of your post is an opinion, as much as you believe you have "penetrating insight".

No.. it's not "opinion." It's historical fact.. The renaissance was brought about by Italian merchant capital. Also, the idea that markets allocate resources based on the price mechanism and profit/loss constraint is called basic economics.

No.. it's not "opinion." It's historical fact.. The renaissance was brought about by Italian merchant capital. Also, the idea that markets allocate resources based on the price mechanism and profit/loss constraint is called basic economics.

Yes, assuage over the fact that financial services and networks existed before advanced civilization.

Basic economics tells you how the economy works. That is not on topic of finance's essence in society. You're doing that thing where your class lectures is the furthest your critical thinking has gone.

I'm a proponent of capitalism. But I'm speaking objectively here. You're bringing your biases and opinion into this, because a socialist would argue that an advanced society has no credit or financial system as we know it.

No.. it's not "opinion." It's historical fact.. The renaissance was brought about by Italian merchant capital. Also, the idea that markets allocate resources based on the price mechanism and profit/loss constraint is called basic economics.

Yes, assuage over the fact that financial services and networks existed before advanced civilization.

Basic economics tells you how the economy works. That is not on topic of finance's essence in society. You're doing that thing where your class lectures is the furthest your critical thinking has gone.

I'm a proponent of capitalism. But I'm speaking objectively here. You're bringing your biases and opinion into this, because a socialist would argue that an advanced society has no credit or financial system as we know it.

You're not a proponent of anything kid. You're clueless. Capital is a resource like anything else. It's scarce, needs to be efficiently allocated and has varying levels of productivity (depending on how it's allocated). Go find a textbook okay? Shoo.

It's hard to take you seriously when one of your talking points is being "pretty good with Excel." In the economic sense, sure, we can attribute value to you. In a practical sense, I'd say the value produced by any white-collar job should seriously be questioned.

No one really knows why finance gets paid so much, because finance produces nothing. The only indication that bankers can be paid a lot is that finance is the bedrock of capitalism. Any organization in this society relies on the services financiers provide.

Finance is the bedrock of any advanced civilization.

This is an opinion, generally speaking. The earliest civilizations had ledgers, accounting systems, IOUs, etc. The first banks, I believe popped up before the Renaissance, although I could be mistaken--I don't really remember this anymore.

Most of your post is an opinion, as much as you believe you have "penetrating insight".

Its actually not an opinion. This is covered often in CFA text as well.

https://www.cfainstitute.org/en/research/foundatio..."Economic growth depends on the efficient allocation of resources, including the two main factors of production: labor and capital. Markets, operating on each factor, have allocated these resources in economies worldwide in ways that arguably approach optimality and have fostered economic development for the benefit of billions. Capital markets, both for debt and equity securities, have allowed firms to secure funding for productive uses while providing investors with opportunities for portfolio diversification. The importance of capital markets for the development of economies and for the betterment of society cannot be overstated."

Because when you have economic growth, generally the standard of living increases. So as Esuric says, 'advanced civilization.'

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee

No one really knows why finance gets paid so much, because finance produces nothing. The only indication that bankers can be paid a lot is that finance is the bedrock of capitalism. Any organization in this society relies on the services financiers provide.

Finance is the bedrock of any advanced civilization.

This is an opinion, generally speaking. The earliest civilizations had ledgers, accounting systems, IOUs, etc. The first banks, I believe popped up before the Renaissance, although I could be mistaken--I don't really remember this anymore.

Most of your post is an opinion, as much as you believe you have "penetrating insight".

Its actually not an opinion. This is covered often in CFA text as well.

https://www.cfainstitute.org/en/research/foundatio..."Economic growth depends on the efficient allocation of resources, including the two main factors of production: labor and capital. Markets, operating on each factor, have allocated these resources in economies worldwide in ways that arguably approach optimality and have fostered economic development for the benefit of billions. Capital markets, both for debt and equity securities, have allowed firms to secure funding for productive uses while providing investors with opportunities for portfolio diversification. The importance of capital markets for the development of economies and for the betterment of society cannot be overstated."

Because when you have economic growth, generally the standard of living increases. So as Esuric says, 'advanced civilization.'

Yes, a round of applause for both of you. You were taught well. Thank your professors, your parents, mentors, and please take a bow too.

No one really knows why finance gets paid so much, because finance produces nothing. The only indication that bankers can be paid a lot is that finance is the bedrock of capitalism. Any organization in this society relies on the services financiers provide.

Finance is the bedrock of any advanced civilization.

This is an opinion, generally speaking. The earliest civilizations had ledgers, accounting systems, IOUs, etc. The first banks, I believe popped up before the Renaissance, although I could be mistaken--I don't really remember this anymore.

Most of your post is an opinion, as much as you believe you have "penetrating insight".

Its actually not an opinion. This is covered often in CFA text as well.

https://www.cfainstitute.org/en/research/foundatio..."Economic growth depends on the efficient allocation of resources, including the two main factors of production: labor and capital. Markets, operating on each factor, have allocated these resources in economies worldwide in ways that arguably approach optimality and have fostered economic development for the benefit of billions. Capital markets, both for debt and equity securities, have allowed firms to secure funding for productive uses while providing investors with opportunities for portfolio diversification. The importance of capital markets for the development of economies and for the betterment of society cannot be overstated."

Because when you have economic growth, generally the standard of living increases. So as Esuric says, 'advanced civilization.'

Yes, a round of applause for both of you. You were taught well. Thank your professors, your parents, mentors, and please take a bow too.

You didn't actually say anything.

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee

No one really knows why finance gets paid so much, because finance produces nothing. The only indication that bankers can be paid a lot is that finance is the bedrock of capitalism. Any organization in this society relies on the services financiers provide.

Finance is the bedrock of any advanced civilization.

This is an opinion, generally speaking. The earliest civilizations had ledgers, accounting systems, IOUs, etc. The first banks, I believe popped up before the Renaissance, although I could be mistaken--I don't really remember this anymore.

Most of your post is an opinion, as much as you believe you have "penetrating insight".

Its actually not an opinion. This is covered often in CFA text as well.

https://www.cfainstitute.org/en/research/foundatio..."Economic growth depends on the efficient allocation of resources, including the two main factors of production: labor and capital. Markets, operating on each factor, have allocated these resources in economies worldwide in ways that arguably approach optimality and have fostered economic development for the benefit of billions. Capital markets, both for debt and equity securities, have allowed firms to secure funding for productive uses while providing investors with opportunities for portfolio diversification. The importance of capital markets for the development of economies and for the betterment of society cannot be overstated."

Because when you have economic growth, generally the standard of living increases. So as Esuric says, 'advanced civilization.'

Yes, a round of applause for both of you. You were taught well. Thank your professors, your parents, mentors, and please take a bow too.

You didn't actually say anything.

But do you want a cookie for understanding basic economics? I don't understand

But do you want a cookie for understanding basic economics? I don't understand

You posted that 'finance produces nothing' on a finance site. You're obviously jaded about something. You haven't really elaborated, so basic economics is where I start.

Your move, boss.

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee

But do you want a cookie for understanding basic economics? I don't understand

You posted that 'finance produces nothing' on a finance site. You're obviously jaded about something. You haven't really elaborated, so basic economics is where I start.

Your move, boss.

Right, more specifically nothing of physical significance, especially for most consumption, which happens at the consumer level. Buying a house, for example, makes most consumers feel obligated to tap financing because that's the way it works, as you so greatly described. That's fine with me.

But if you objectively could consider a world where that wasn't true and all was perfect, that's the fairytale that a lot of socialist want to believe. I'm not arguing this case.

Lawyers, doctors, travel, etc, provide services that are tangible for people, whether it's legal briefs, healthcare tech or services, or an itinerary. Finance is not involved in any production of anything, except maybe similar to the latter of the aforementioned list, but that is only experienced circumstantially, because again, that's just how things work.

Maybe I'll have to dig around for some deeper thoughts on this, but I hope that makes sense.

No, that doesn't make sense. The MRI machines, the pharmaceutical products, medical devices, etc., that the doctor uses to conduct his/her profession ultimately came from an investor, a capitalist. Without the capitalist, the doctor would have to save on his/her own in order to obtain the capital goods required. With the advent of capitalism, he/she no longer has to wait, assuming that the market deems his/her profession viable.

No, that doesn't make sense. The MRI machines, the pharmaceutical products, medical devices, etc., that the doctor uses to conduct his/her profession ultimately came from an investor, a capitalist. Without the capitalist, the doctor would have to save on his/her own in order to obtain the capital goods required. With the advent of capitalism, he/she no longer has to wait, assuming that the market deems his/her profession viable.

Basic stuff my boy.

I do agree with this, so I threw you an SB. But it's only because you can't logically expect to improve the world around you unless you create something out of nothing, which is a burden. That burden is credit, which is the financial sector. The financier might own the MRI, but he did not design it, he did not come up with the idea, he did not use tools to build it. I think it is that people don't want to believe in that burden--which is socialism--but that's ridiculous. It's a reality that society can't afford to deviate from with some silly "dysphoria". Hope that makes sense.

You think a legal brief is anything different than an excel model? Finance guys at least choose who gets money which does have value instead of being randomly distributed.

This is actually the fallacy of pure passive investment. Someone has to choose whose in the index. Other joethehobo could just ipo himself and get the same valuation as Apple if their were no finance guys deciding what things are worth. If you had no finance and capital was randomly distributed bezos would get as much financing as a heroin addict.

Lawyers just write up contracts to make sure finance guys don't cheat each other too much.

Lawyers help enforce human rights, property rights, and the rule of law, 3 critical elements of an advanced civilization/economy.

Strictly from a business standpoint, having lawyers helping to define rights and navigate the regulatory landscape greatly reduces the risk that people/companies will lose money because of double-dealing. Economies with weak rule of law and property rights lag far behind those with advanced legal systems.

No one really knows why finance gets paid so much, because finance produces nothing. The only indication that bankers can be paid a lot is that finance is the bedrock of capitalism. Any organization in this society relies on the services financiers provide.

Finance is the bedrock of any advanced civilization. The period before finance was called the dark ages and the introduction of finance was known as the renaissance. Finance is what turns ideas into reality. The engineer, the architect, the doctor, the whatever the fuck has an idea, but he/she doesn't know if it's a good idea.

That's where finance comes in. It is the mechanism by which scarce capital, of which there are an unlimited number of potential uses, are allocated to their most warranted economic activities. By process of trial and error, the bad ideas are weeded out (do not produce at least required rate of return) and good ideas persist.

It's amazing to me that you're certified in banking and don't know this. A product of our nationalized education system, I guess...

Lmao, I scanned over your post but could hardly get past the first line. Just wow. Tries to explain basic economics.. very amazing how dense and arrogant you are. You must trip over your own dick.

No one really knows why finance gets paid so much, because finance produces nothing. The only indication that bankers can be paid a lot is that finance is the bedrock of capitalism. Any organization in this society relies on the services financiers provide.

Finance is the bedrock of any advanced civilization. The period before finance was called the dark ages and the introduction of finance was known as the renaissance. Finance is what turns ideas into reality. The engineer, the architect, the doctor, the whatever the fuck has an idea, but he/she doesn't know if it's a good idea.

That's where finance comes in. It is the mechanism by which scarce capital, of which there are an unlimited number of potential uses, are allocated to their most warranted economic activities. By process of trial and error, the bad ideas are weeded out (do not produce at least required rate of return) and good ideas persist.

It's amazing to me that you're certified in banking and don't know this. A product of our nationalized education system, I guess...

Lmao, I scanned over your post but could hardly get past the first line. Just wow. Tries to explain basic economics.. very amazing how dense and arrogant you are. You must trip over your own dick.

Occasionally, I hear this sort of BS on WSO. If that's really what you think of finance, you should either quit your job or somebody should fire you for not having a fucking clue why you wake up in the morning every day.

This commentary is dumber than anything that could ever come out of a first year analyst's mouth.

Occasionally, I hear this sort of BS on WSO. If that's really what you think of finance, you should either quit your job or somebody should fire you for not having a fucking clue why you wake up in the morning every day.

This commentary is dumber than anything that could ever come out of a first year analyst's mouth.

Fuck off moron. If you're that insecure about your job, you need to go do something else.

Also, if you don't understand the technical aspects (or just anything one notch up beyond 'basic economics') of how the market efficiently rewards productivity, and how that fits into my post justifying why finance gets paid so much, you definitely need to quit your job.

You're just one of the many suckers who are overly reactionary, sensitive, conservative cucks, who lack sound reason or critical thinking.

First, love how you keep mentioning this "basic economics" when I see no proof from any of your previous posts that you understand any economics at all. Your very position is evidence of not understanding the basics of economics.

Second, this has absolutely nothing to do with being conservative, liberal, communist or libertarian. If you don't think your job adds anything of value to society, you should probably quit because you're sort of a piece of shit otherwise.

It's kind of like being an environmentalist who doesn't believe in global warming....maybe if that's the case, you should find a job other than Green Peace. All I'm asking is for you to be consistent with your beliefs. I'm sorry that's such a sore spot for you.

First, love how you keep mentioning this "basic economics" when I see no proof from any of your previous posts that you understand any economics at all. Your very position is evidence of not understanding the basics of economics.

Second, this has absolutely nothing to do with being conservative, liberal, communist or libertarian. If you don't think your job adds anything of value to society, you should probably quit because you're sort of a piece of shit otherwise.

It's kind of like being an environmentalist who doesn't believe in global warming....maybe if that's the case, you should find a job other than Green Peace. All I'm asking is for you to be consistent with your beliefs. I'm sorry that's such a sore spot for you.

What are you talking about? Change your name to "didn't read anything".

What you believe in is the operative point; 3/4 words provoked your stupid reaction, but you're not alone

How old are you? Because I suspect you don't know anything, as WSO skews a younger demographic

All the MS in the world and telling me what I believe in, doesn't offer up a single measurable unit of output

You confuse productivity with societal value or merit, but I don't know anything about economics

I specifically indicated a demand for finance, not my beliefs, not my "penetrating insight" or how much Excel I know when talking about pay, but I don't understand economics and literally no one understands my post

Economists have exactly this problem and have had it for at least a decade now, measuring finance output, yet you're on here trying to argue the point and can't even provide that unit of output

Kudos to iBanked's answer. Now in terms of why I deserve my pay vs. others. I think too often people in the industry think they're god's gift and become insufferable in their own ways.

I think of myself as a doer in that I will get the job done, whatever it is; to this, flexibility is a must. I am a team player and don't lose my cool. I have interests outside of sleds and deals. I am not a social idiot, and can mold myself to the setting.

The above doesn't sound like much, but there are way fewer people who tick all those boxes. I don't mean this in a cocky fashion, but just having a level of self-awareness is lost on many.

hmmmmmm so you support and believe in working in an industry that you believe produces nothing?

what is this, JT Marlin?

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee

PWM-Finance is foreign to many individuals who have become successful in their respective fields. Many of whom would prefer to focus on what they enjoy doing, rather than try and navigate the markets and all of the options in front of them in preparing for retirement. That being so, I help them make sound decisions throughout their life that lead to a smooth retirement in the most tax efficient manor possible. They get to focus on what they love, and leave the rest to me.

Actually this is incorrect, clients only very rarely (less than one per year tbh) complain about fees. If they do, I point them towards another adviser, I know my worth, and they should recognize it. If they don't, it's not my job to prove it to them, and I would prefer to allocate my time towards those that appreciate it most. To our clients, they would rather focus on what they love, rather than stress about the investment side of things. This could be their hobbies, their businesses, traveling, or something other all together. To them, the markets and plethora of retirement options are extremely daunting, and there are too many variables for them to feel comfortable in doing it all on their own. Basically, they are the captain of their ship, and I am the little GPS that keeps them going in the right direction and warns them should they veer slightly off track. To them, that service is well worth it. Not to mention my highest breakpoint fee is 95 bps tapering down to 70, which is relatively cheap compared to the market taking into consideration all of the services (taxes, tax planning, investing, estate planning, etc.) we provide.

A lot of stupid debate above. Do we produce something in finance? No. We're intermediaries offering a service: advice on how to link those who have capital with those who want it.

Why are finance professionals paid so well? Because the stakes are often very high, and the difference between bad advice and good advice could mean many millions of dollars. Hell, the difference between great advice and the best advice could mean billions. The market is happy to spend big on that service because the consequences are even bigger.

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee

Yeah, what this industry actually does, at a fundamental level, is "stupid debate."

Amazing to me that so many people voluntarily devote countless hours to a profession that they not only misunderstand but actually deride. What kind of person spends 90+ hours a week doing something that "doesn't provide value?" I thought millenials were supposed to be idealistic.

I was calling the debate above stupid because I don't think your point can be argued - and also because it devolved into name calling instead of useful discussion. Finance doesn't produce tangible goods, but it does produce value. End of story as far as I'm concerned.

I was calling the debate above stupid because I don't think your point can be argued - and also because it devolved into name calling instead of useful discussion. Finance doesn't produce tangible goods, but it does produce value. End of story as far as I'm concerned.

Consumer goods are the result of a coordinated process of production consisting of capital, labor and land (typically referred to as the "factors of production"). The investors ("capitalists") are in essence providing the tangible, physical capital goods required for production (machinery, intermediary goods, tools, etc.).

I say "in essence" because there's the intermediary step of converting cash into equipment but, fundamentally, the investors are providing the capital goods. Finance is the channel that not only facilitates, but permits this process. It matches the excess savers with excess borrowers and includes a valuation component to ensure the allocation is efficient (degree to which is debatable).

The money dynamic does complicate the shit out of it (it's why monetary and capital theory are intermingled), and literally the greatest minds in economics have tried to wrap their head around it (Hume, Mill, Marx, Bohm-Bawerk, Wicksell, Hayek, Mises, Minsky, Friendman, Keynes, etc.) but finance does provide "tangible goods."

It is the sad state of affairs that undergraduates are convinced that making an iPhone game or optimizing Tinder is producing something of tangible value, while financing a pharmaceutical company or a railway or a real estate project is just smoke and mirrors and that banking carries neither meaning nor merit.

It is the sad state of affairs that undergraduates are convinced that making an iPhone game or optimizing Tinder is producing something of tangible value, while financing a pharmaceutical company or a railway or a real estate project is just smoke and mirrors and that banking carries neither meaning nor merit.

Look, finance produces nothing. Used to be an objective truth. But people wanted an extra car or stereo. Then the financial crisis happened, then Occupy Wall St, which has in turn fully blown into a national comfort with socialism. It's because finance produces nothing, which confuses its value and merit.

Socialism doesn't work because it's a fallacy about the burdens of life that can't be fixed or cured or assuaged over. You cannot make life better unless you create something that doesn't already exist. End of story. That's the burden that capitalism addresses, and socialism has no component for this.

Wall street is too apologetic of itself and can't stand up for itself when the leftists and progressives holler that finance produces nothing. It don't matter because it effectively has caused the advancement of society, in spite of.

I can't believe how much people are willing to bend and coward to the progressives. Finance produces nothing and it is good.

Alright, I'll bend to the technicality that finance directly "produces" nothing and agree with your points. My point is that directly "producing" things is a tiny (albeit very important) part of our economy, along with agriculture. Most people don't produce anything, they service others.

Question is also where you draw the line on this....does the architect who draws up a building produce nothing? What about secretary who schedules the architect's appointments? Is the guy literally laying down the bricks the only person who produces something? Even for him, you could say that he just puts some bricks down but doesn't make the whole building.

Everyone from the banker to the secretary are a part of the production process. Some have more and some have less responsibility in the process, but it's retarded to assume there is no contribution to the process simply because you aren't laying down the bricks.

Question is also where you draw the line on this....does the architect who draws up a building produce nothing? What about secretary who schedules the architect's appointments? Is the guy literally laying down the bricks the only person who produces something? Even for him, you could say that he just puts some bricks down but doesn't make the whole building.

Everyone from the banker to the secretary are a part of the production process. Some have more and some have less responsibility in the process, but it's retarded to assume there is no contribution to the process simply because you aren't laying down the bricks.

"Riggs 1981 stated, it productivity is the quality that indicates how well labour, capital, material and energy are utilized, it is the output resulting from given resources - input at a given time."

Why are you on here?

Architects are a direct labor input (because they do high level planning and design), along with engineers. If the secretary makes copies and does other desktop administrative work at the company, he is a productive member of the labor pool, albeit measurably smaller.

All of a sudden now, a banker is involved in production, because you say so LOL just KYS. You don't know shit.

Capital is a resource, but it directly and measurably being productive in the economy does not come from the investor/financier side; since it is a resource used in production, means that the end product, attributable to direct labor units of the producer, get credit for the level of output contributed to the economy.

Since finance typically originates all capital allocation throughout the economy, you might be able to measure the level of capital in use throughout the economy. You might attribute that level of capital to the financial sector being productive, which is I think generally the operative measure (comparing a country like the US to a country like Guatemala, etc.).

But looking at specific output at a more granular/specific nationwide level is much more tough. In terms of what specifically is being produced by finance is ambiguous and up for a debate. Finance doesn't create the capital. It allocates it, but how productive it's being allocate is difficult to judge. You can look at fund returns/corporate returns, but then you don't want to assume too much risk as a credit/equity holder. If the market deviates from what should be expected (inefficient company managers, above average company managers, market deviants in trends, etc) no one knows how much of that is attributable to above average fund managers, how productive their products are, etc.

Trying to fit finance into a real and measurably productive economic role, from what I've seen and read is like trying to fit a square peg into a round hole. But keep the MS coming. Loving this.

So before the architect can start drawing his plans, someone has to do the math on whether the plan is financially feasible, correct? Someone has to determine whether the project makes economic sense. The architect can't start his job until this has been figured out with the finance guys and the gulp....the bankers. It's part of the planning process very similar to drawing out the outline of a structure before building it.

So before the architect can start drawing his plans, someone has to do the math on whether the plan is financially feasible, correct? Someone has to determine whether the project makes economic sense. The architect can't start his job until this has been figured out with the finance guys and the gulp....the bankers. It's part of the planning process.

Obviously a finance person will make this argument. Problem is bankers don't bill hourly like lawyers. If they did, that'd be a measurable unit of productivity. But we know that's not how it works.

If a project manager/architect, whoever submits a plan to a bank, that plan either is approved or not approved by the internal credit/investment committee, based on some additional diligence work by the bankers. Bankers are not looking at alternatives or measuring different options to determine feasibility. There is no real "planning" input on the banker end. I doubt most bankers know shit about architecture or engineering.

The people determining economic feasibility are the direct operating/overhead labor input. They'll look at alternatives, they'll determine all relevant assumptions based on experience, etc. It's only up to the bankers to review and the credit/investment committee to decide whether to include its risk profile.

Correct, and if it's too risky. It doesn't get built and the bricklayer and architect just sit on their ass doing nothing productive at all.

Do you support a society where building projects are supported regardless of their financial risk?

Does it not add value to society that someone through a credit committee and due diligence helps to determine whether a loan should be made?

If it's too risky, it might still be built, as has been shown throughout history around the world. The reason is that it's difficult to judge real outcomes and direct real financial inputs to measurable economic activity. It's the reason there's the corporate veil, market diversification, cash-flow thresholds, or any other risk reducing barrier, increasing the cost of capital.

I don't know how else to put it, because I'm not an economic expert, but the bottom line is that finance exists almost in an abstract domain in terms of measurable contribution to society.

This is not a discussion on social value. I, personally, view finance as very valuable to society. Just as Esuric and Isaiah indicated above, obviously there is some correlation between more advanced societies and a very active finance sector.

My personal beliefs, though, are not going to be valued by anyone. Whether finance pay is justified needs to be taken with an objective approach, as I've been trying to bring reason to this thread since my first post.

Unless people believe in capitalism (which I unequivocally think all should), it's hard to justify finance pay, because it does not directly produce anything of tangible value.

All you can really do is go on a Will Emerson like rant about the significance of the role that credit and the financial sector has played in our lives, which is the point Esuric makes about finance being a staple of all advanced civilization. It's important, it's meaningful, but it's hard to justify in a non-abstract, postulating, roundabout way.

The reason finance is rewarded so favorably, though, is because of our social dependence upon capitalism to bring us the delights of the modern and advanced civilization. It's a simple supply/demand issue.

Ok...you want economics....marginal revenue product. If your MD can bring in $6 million dollars in fees for the bank next year, they are more than happy to pay him $1 million and the rest of his team $2 million.........bank is left with a $3 million profit. End of story.

Ultimately, how much revenue you are bringing in will in some way be related to your compensation. If you think that an employee will bring in $6 million for you and will collect $100K per year without jumping ship, think again. Hence, you have to bid up their compensation closer to the MRP.

The real question is why banking fees are so high, but given that a single person can bring in this much revenue for a bank, it is a no-brainer, why bankers earn this much.

Ok...you want economics....marginal revenue product. If your MD can brings in $6 million dollars in fees for the bank next year, they are more than happy to pay him $1 million and the rest of his team $2 million.........bank is left with a $3 million profit. End of story.

Ultimately, how much revenue you are bringing in will in some way be related to your compensation. If you think that an employee will bring in $6 million for you and will collect $100K per year without jumping ship, think again. Hence, you have to bid up their compensation closer to the MRP.

The real question is why banking fees are so high, but given that a single person can bring in this much revenue for a bank, it is a no-brainer, why bankers earn this much.

Yeah, fees are harder to explain. Obviously, a banker who has the ability to make it rain will be in high demand, so he will be paid well. I never argued against that.

Maybe I don't understand your question. Are you asking why companies pay investment banking fees? You work in banking, so you know it's an enormous undertaking to sell a company that normally takes between 6-18 months. Bankers know how to do it efficiently, effectively and confidentially, ultimately generating higher purchase prices than if you tried to do it yourself (not to mention while you're running a company at the same time). So from a Company's eyes, the benefit bankers provide easily covers the 1-2% SUCCESS fee.

Yup. A little more advanced than your typical undergrad econ textbook but then you get into search cost theory. There is a real cost to finding buyers. Hence, hiring someone to reduce search costs adds real value.

Another issue is agency costs.....also not always in undergrad econ books. A company can do some deals by itself for cheaper, but it's a huge headache. Just hire a bank for a couple of million to do it for you - it's not your money after all. Same reason CEOs will fly private jets. They could fly commercial, but what the fuck? Not their money right. It's a small drop in the bucket for a large enough company.

Factors like these can result in excessive fees, but what do I know since @iBankedUp has already determined that I'm an economics ignoramus.

Just hire a bank for a couple of million to do it for you - it's not your money after all. Same reason CEOs will fly private jets. They could fly commercial, but what the fuck? Not their money right. It's a small drop in the bucket for a large enough company.

I know you're agreeing, but I think you're missing the point. Companies don't hire investment banks because they like to throw money around. Companies hire banks because they manage transactions better than the Company can (and therefore generate higher selling multiples / better terms on capital raises / more favorable restructuring outcomes). These are real, tangible and measurable benefits. Not to mention that it is a huge opportunity cost for management to divert their attention from operating the business.

In some cases, I would agree. Certainly for a sell-side transaction, a bank can add a lot of value as they know the market better than the company.

But for buy side mandates, it's really more of a convenience and a little bit of throwing money around. For example, where I currently work, our legal team and corp dev department takes care of most smaller deals. It's really not necessary to bring in a bank - we can manage the transactions just fine internally.

For bigger deals, we hire banks, but it's more a convenience issue. Think about something like a $3 or $4 million fee for one transaction. How many corp dev. people with banking experience can you hire full time with that money? A LOT!! If you're worried about just managing a buy side transaction, I don't think hiring a bank is the cheapest way to do it, but it is by far the most convenient way to do it.

I produce returns, and I'm compensated with a percentage of those. This is not at all a judgment of those whose position doesn't enable them to quantify the value they've created, but when my clients realize a return on their participation in my deals, that's tangible and it's something I created with my knowledge and relationships (that I work systematically to hone and cultivate). Perhaps they could have earned that somewhere else, but they entrusted me to create that and I did. Like @Cav21x, I also consider myself a doer. A lot of you are very smart, reframe what you do a little more positively, if only for your own sake. And if no one else says it, have a great afternoon.

I produce returns, and I'm compensated with a percentage of those. This is not at all a judgment of those whose position doesn't enable them to quantify the value they've created, but when my clients realize a return on their participation in my deals, that's tangible and it's something I created with my knowledge and relationships (that I work systematically to hone and cultivate). Perhaps they could have earned that somewhere else, but they entrusted me to create that and I did. Like @Cav21x, I also consider myself a doer. A lot of you are very smart, reframe what you do a little more positively, if only for your own sake. And if no one else says it, have a great afternoon.

This. Usually, in my case, my team and I (which I contribute a great deal toward opportunity/site selection, risk mitigation, upside potential, due diligence, closing, negotiation, etc.) have performed well in the past by way of returns and performance. So, we invest/manage our investors'/clients' money as-well-as-or-better-than our peers, and that performance justifies our compensation. Similarly, if we are talking about the brokerage side of things, one could argue that a good broker's value is that they identify two parties of the deal and facilitate/navigate through the deal in an advisory capacity. In some cases, this may involve heavy fiduciary responsibilities as well as participation in negotiations. This is why better brokers can usually command a bigger fee % than shitty ones, which are left with being a loss-leader as the only strategy that allows them to capture market share.

In regards to the actual thread topic; I'm worth it for the same reason any stock is worth it's price; because someone paid that amount for it. Any other answer indicates a personal bias.

The reason undergrads are getting paid six figures are because banks need the smartest, hardest-working kids to make their materials, because those materials are needed by companies to understand/discuss large financial transactions, because those companies are willing to pay large fees for advice/underwriting.

Why do banks need the smartest students? It seems that Finance isn't something such as engineering which requires specific rigorous knowledge. Banks pick from any major at top universities. Imagine google or facebook doing that.

If you were the CEO of a big corp, would you want the person doing the analysis for your deal (be that an M&A event, IPO or debt raise) to be an idiot? You know one of the most defining events to happen in an executives life.. Would they trust the work of someone who wasn't the brightest and best when it means literally losing billions in value?

By the way, Google doesn't really care what major you did if you can build stuff.

I think it is hard to justify your value when anyone can do the work, they call it monkey work for a reason. While it may be true Google doesn't care about major, the required skills are not something anybody just casually picks up such as finance.

I think it is hard to justify your value when anyone can do the work, they call it monkey work for a reason. While it may be true Google doesn't care about major, the required skills are not something anybody just casually picks up such as finance.

Lmao, what an absolutely retarded statement. $100 says you're not a day older than 21.

Yeah but dude finance isn't really all that hard. It's just a lot of time consumption trying to connect the dots and try to figure everything out and then proceeding to close some sort of deal. Like in all seriousness it is challenging yes... but it's not extremely difficult that requires you to spend hours upon hours trying to solve a complex problem like you would in mathematics or engineering.

Lol my family is a family of engineers, they definitely don't seem to be "using complex mathematics" to solve problems all the time. Most of their work is process based.

Truth is, most jobs aren't difficult if you have at least a decent IQ - there are some (advanced research in science/technology/mathematics) that are, but most are not. The trouble is in assuming that a "decent IQ" means anyone can do them, which is far from the case.

yeah you know what i think you're right because if there's anything I've noticed is that people who have years of experience in any field, you tend to notice that everything becomes so simple and easy for them because they've been doing something for so long. Like i remember when i was first assigned to create a pitch book for a company and was told to do the research and it took me a whole 14 days to get it right, and I was annoying my director because of how long it took me to understand a market that i was seeing for the first time vs a market that he's been experienced with years and all it takes is for him to read one report to understand everything because he already knows the ins and outs vs me who's pretty much thrown in the water and i have to learn how to swim. My point being is you're right and that things that seem complex and hard at first end up becoming easy and simple to you because you master it and become so used to it, to the point where it's no longer complicated and is just basic shit. I wouldn't even say you need a high IQ, i'd say you just need to learn how to do it and you'll be fine.

You must be the odd man out in your family if it's full of engineers and you say that "most of their work is process based." I was an engineer for 20 years designing control systems for power plants, then becoming lead engineer, then Project Engineer, Project Manager. I can assure you there was not a damned thing "process oriented" about doing any of that other than the process of busting my ass for 2 decades and sacrificing to get where I am today.

I don't think you have a clue about "most jobs", as with most jobs, one starts out at the bottom and moves their way up by LEARNING A SKILL. Foreign concept I suspect, but the days of having a HS education, sitting on an assembly line, turning a screw every couple of minutes and making $100k/year are gone. Flint, Michigan is proof-positive of that fact.

STEM jobs are the future and anything "process-based" will be relegated to a machine that we non-process-based humanoids invented.

Point being is engineering school has many prerequisites that one must complete to even understand the material. Finance, on the other hand, one is able to grasp the material without any prior knowledge. Do you honestly think you could waltz into a graduate or even an undergrad engineering course and have a hint of a clue of what is going on? Contrast that with Finance, where people of various backgrounds aren't heavily disadvantaged. Look at the CFA and MSF. If you had to bet money on which degree requires one to invest heavily in education to understand the concepts, then it's no contest. One can easily be self-taught while the other has more depth and rigor thus being taught by competent individuals can help more.

Smart is among the least of the attributes I look for in candidates. Ahead of smart I would put trustworthy, honest, diligent, self-motivated, curious, cooperative, etc. You need to be smart but it's a hurdle, not a measuring stick.

Banking is more about relationships than finance skills. We work hard to make money for ourselves and for our client. Clients can go to any banker, but they keep going to the same people over and over because they trust their banker to execute and deliver value.

In regards to the actual thread topic; I'm worth it for the same reason any stock is worth it's price; because someone paid that amount for it. Any other answer indicates a personal bias.

The reason undergrads are getting paid six figures are because banks need the smartest, hardest-working kids to make their materials, because those materials are needed by companies to understand/discuss large financial transactions, because those companies are willing to pay large fees for advice/underwriting.

In the white-collar high rise positions (finance, exec mgmt, law, etc.), salaries are justified based on the amount of accountability you [should] ultimately have. A lot of times this doesn't work out and corporate execs can get out for making debilitating decisions or financiers make horrible investment advice, which makes this point a sham.

This question is rooted not in how much finance typically makes, but how disparate it can be to other careers, especially in the early stages, it's a baiting question by nature, thus this thread descending into another WSO abyss.

Instead of justifying why I should earn my salary, Here are 2 professions that reward the 'front office' roles so damn much that it really hurts the profession:

I'm with Bob on this one - I don't get why two of arguably the most difficult (on average) career tracks to get on shouldn't have out sized compensation. Think of how important a doctor is to a hospital or a private practice - a good or bad one can make or break a department/practice. Especially when you look at the risks/stress/effort involved in this field to get to where they are, it's pretty staggering. With pro-athletes, there are very few people who can do what they do to the level that they can do them. With the amount of revenue/interest they command, it absolutely justifies their comp packages. Even if LeBron makes a shitload of money for the Lakers, he's going to drive several X times that in merchandise, TV, ad and ticket revenue for the organization and league as a whole.

Pro athletes is a winner take all-market. Kind of like being a trader. In either one being marginally better than the other guy is the different between making 30 million a year and being homeless.

Aaron Rogers 30 million a year. 61st best qb homeless. (Teams only carry one back up now unless it's a developmental guy.). The absolute skill level difference between those guys isn't likely that big.

Knowing how to use Excel and Powerpoint to dazzle people with bullshit is a critical skill any organization needs to get their hands on OPM. Someone can have all the operational experience and business savvy in the world, but if their presentations and models look like someone over the age of 50 or under the age of 10 (those are equivalent for this purpose), no one will give them that sweet, sweet capital they need to keep Ray Dalio's economic machine running.

1) Especially for those who are working in the Finance/Treasury teams of corporates, you have close/direct access to the company's money, and therefore it's important for you to be remunerated highly to remove any incentive to steal that money you're dealing with day in day out.

2) For those in the business of sourcing capital for others, you're the equivalent of a sales person in any other industry. You're bringing in the business and therefore you get a cut of that new revenue. Why does your bank get that high commission/fee in the first place? Because that's the market's view of the price to get $x amount of capital.

3) For those investing for others, that's also the market's view of the price of getting them a certain targeted return on their investment.

4) For those doing any detailed structuring/modelling, you're providing complex solutions not unlike that of engineers and lawyers. So you're worth the money.

In most cases, Finance acts as the enabler for production - the main driver for the economy.

There are plenty of posts on here about whether or not IB or other finance jobs are "worth it." However, I haven't seen many posts on whether or not people on here think that they're worth all of the benefits that come from top finance jobs (high salary, great exit opps, etc.). What makes you think that you're worth it?

I'd say the previously high pay of finance was excessive and almost certainly participants were over-paid, and we're generally not worth the money paid.But now, I think the party is over.At least, that's my experience out here in Asia.I was a VP2 at a bulge bracket, and got 200k salary, 40k bonus, 8 years ago.Now I'm in PE, Sr. Director level, running a group, and get 200k, no bonus.Not sure how that jives with US levels, but there you go.

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